What's Happened to Mortgage Interest Rates the Last Three Weeks?

Rates have worsened considerably over the last three weeks. The best execution for 30-yr. mortgages clearly point to 3.5s, which means that rates have definitely moved to 3.75%-4.00%, or even higher depending on loan level price adjustments, and those setting prices are having to deal with companies sacrificing margin on the behalf of keeping loans coming in the door. And those with loans scheduled to fund this week are making sure they do - no one wants to try to extend when their rate lock is three points worse than the current market. The good news, although it is a little hard to focus on right now, is that rates have moved higher in reaction to the continued good economic news coming from various sources, not the least of which is housing and jobs - and no inflation. That may change, but if more borrowers qualify, or fewer homes are underwater, that is not a bad thing.

TOP 10 METRO AREAS SEEING A SPIKE IN HOME VALUES

#	U.S. Metro	Y-o-Y% change in prices
1	Las Vegas, NV	28.5%
2	Oakland, CA	26.3%
3	Sacramento, CA	25.6%
4	Phoenix, AZ	23.3%
5	San Jose, CA	22.9%
6	Bakersfield, CA	19.0%
7	Orange County, CA	18.6%
8	San Francisco, CA	18.1%
9	Riverside-San Bernardino, CA	18.1%
10	Warren-Troy-Farmington Hills, MI

If you think you may still not have enough equity in your house to sell or refinance...think again.

FHA Changes June 3rd Hurts First Time Homebuyers

Regarding the FHA mortgage insurance (MI) changes effective this coming June 3^rd, after several years in the mortgage business I have never seen such a bone-headed move by FHA to do what they are doing with MI.  Think about it. Why would anyone do a FHA loan? The answer is DTI (debt-to-income) is above the tolerance of Fannie and Freddie. Guess where the majority of defaults come from. You got it.

The answer is, of course, that starting June 3, the FHA will require most borrowers using its loan products to keep the insurance for the life of the loan or, in cases with a 10 percent down payment, at least 11 years. The FHA's new mortgage insurance cancellation policy is aimed at shoring up the agency's reserves. The FHA insures its own loans, and the fund registered a $13.48 billion shortfall last November. The shortfall was due largely to loan defaults tied to the recession and housing bust, and altering the cancellation policy and increasing the upfront insurance fees (already done) should generate billions in revenue. Lenders and Realtors know, however, that first-time homebuyers will be those most impacted by the FHA changes, and it's hard for move-up home buyers to move up if someone else doesn't buy their house.

Based on these changes, our FHA volume has dropped markedly. The reason: If the borrower is looking to buy a home with 5% down, and keeping his purchase price at or under $439,000, with a maximum loan amount of  $417,000,  it would make more sense to go with a conventional  Fannie Mae or Freddie Mac mortgage. The savings to the borrower are huge, in light of the recent Mortgagee Letter# 2013-04 (see attached). In addition to the borrower having to pay the new higher UFMIP of 1.75% (up front mortgage insurance premium of $7298 for a $417,000 loan amount), NOW borrowers must pay the new higher annual MIP (Mortgage Insurance Premium)  of 1.3%, up from 1.2%. With a conventional conforming 5% down loan, up $417,000, the borrower would NOT have to pay the increased upfront premium of 1.75%, but pay only private mortgage insurance, but typically at HALF the RATE of FHA’s MIP.

I suggest if you are a first time buyer, you should get counsel from a licensed mortgage professional and know all of your options.

Mortgage Rates Hit All Time Low for 2013 This Week

Weekly Mortgage Interest Rate Report  —  April 26, 2013

Tom Drasler Home Mortgage Consultant - NMLS #297791 Direct (714) 478-3153 Send me an email     |   Visit my website HomeQuest Mortgage Corporation 25283 Cabot Road, Suite 108 - Laguna Hills, CA 92653

Data Provided by Freddie Mac's Primary Mortgage Market Survey®  Week ending on 4/25/2013 Interest Rate Fees & Points Margin  30 Year Fixed Rate 3.40 % 0.8 N/A  15 Year Fixed Rate 2.61 % 0.7 N/A  5/1-Year Adjustable Rate 2.58 % 0.5 2.74  1 Year Adjustable Rate 2.62 % 0.3 2.76 Above rates are for loan amounts up of $417,000 For up-to-the-minute local mortgage interest rate information, contact:  Tom Drasler at Direct (714) 478-3153  Week ending on 4/18/2013 Interest Rate Fees & Points Margin  30 Year Fixed Rate 3.41 % 0.7 N/A  15 Year Fixed Rate 2.64 % 0.7 N/A  5/1-Year Adjustable Rate 2.60 % 0.5 2.75  1 Year Adjustable Rate 2.63 % 0.4 2.75 This is not intended as an advertisement of interest rates as defined by Regulation Z, Section 226.24. Data is provided by Freddie Mac's Primary Mortgage Market Survey (PMMS) and is provided for informational purposes only. The financial and other information contained herein speaks only as of the date posted above. Freddie Mac, and/or the sender of this information, is not responsible for business decisions made based on the reported results of the PMMS. In general, the data presented were calculated from information collected Monday through Wednesday of the same week that the PMMS is released and may not reflect mortgage rates, fees or points currently available. Rates nudge lower again this week "The housing market is getting a boost with mortgage rates hovering at or near record lows. For instance, existing home sales averaged an annualized pace of 4.94 million over the first three months of this year, the most since the fourth quarter of 2009. More impressively, new home sales topped 424,000 during the first quarter, which was the strongest since the third quarter of 2008. The sales pickup is helping to support house-price gains. For instance, the Federal Housing Finance Agency reported that February marked the thirteenth consecutive month that it has recorded an annual rise in its U.S. house price index, which rose by 7.1 percent in the twelve months through February, the most since May 2006. Even with these gains, this U.S. index is still 13.6 percent below its peak set in April 2007." – Frank Nothaft, vice president and chief economist, Freddie Mac

This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval. Not all loans or products are available in all states. This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval. Not all loans or products are available in all states. HomeQuest Mortgage Corporation is licensed with the California department of real estate, broker license number 0122091.

S&P Signals Why the Housing Recovery is Underway - Why?

After what it called years of tenuous signals indicating that the housing recovery was underway Standard & Poor's (S&P) Ratings Service say this time it is different Why is this time different?  Roundtable participants said the most critical factor is the 6.8 national increase in home prices in 2012.  S&P projects that prices will increase another 8 percent this year.

"Rising prices are a good cure for a lot of headaches," Erkan Erturk, a senior director in S&P's Structured Finance Research Group said.  "Prices also provide a good summary of the broader housing market. 

Erturk said the housing market recovery has positive implications for the economy, consumers, and local governments as sources of tax revenue.  Robust sales, falling if still elevated mortgage delinquency rates and foreclosure sales and increasing residential homebuilding are all key indicators that the sector is rebounding.

"There were a few false recoveries in 2010, driven by tax credits and other government supports," Erturk said.  The housing market had bounced around the bottom for several years, but a recovery began shaping up in late 2011 into 2012.  "2012 was a significant year - the recovery was strong, and the turnaround came faster than we'd anticipated."

Other positive signs include the shadow inventory which is diminishing because of rising home prices which are also pushing about two million homeowners into positive home equity positions.  Still, affordability remains high for would-be-homeowners.

Despite these improving indicators Erturk said a full recovery will require correction of regional and national imbalances such as the existing 40 percent gap between new and existing median home prices.  "In the long run," he said, "we would need to see existing median home prices rise to be consistent with historical 20 percent levels."

Government intervention such as Federal Reserve purchases of mortgage-backed securities (MBS) continue to cause distortions.  "So you could argue if the support disappeared, the market couldn't sustain the recovery," Erturk said.

California Home Prices Surge 8.3% in March

The median price of a home in California shot up in March to $313,000 from 289,000 in February, a one-month increase of 8.3 percent.  The spike put the median price 24.7 percent above the price in March 2012, the 13^th consecutive annual price increase.   California prices peaked at a median of $484,000 in the late spring/early summer of 2007 and hit a low of $221,000 in April 2009.

Sales of new and existing single-family houses and condos increased 31.5 percent from February; 37,764 transactions as compared to 28,719.  DataQuick, which supplied today's data, said it is normal for sales to shoot up between February and March and it appears the March 2013 figures are not extraordinary.  March sales in California have ranged from a low of 24, 565 in 2008 to 68,848 in 2005 and have averaged 43,648 since DataQuick began collecting data in 1988.  The recent figure is 13.5 percent off of that mark. 

Sales of foreclosed properties (REO) had a 15.2 percent market share compared to 18.0 percent in February and 32.8 percent one year earlier.  This was the lowest level for REO sales since September 2007 and well below the peak 58.8 share in February 2009.  Short sales had a 21.5 percent share, down slightly from 22.4 percent in February and 24.5 percent in March 2012.

Home Prices in Orange County and Surrounding Coastal Areas Surge 34%

With homes for sale inventory in Orange County and the surrounding counties the lowest in several years,  couple with current historically low interest rates, home prices are soaring. Unfortunately, personal incomes are not keeping pace with the rising cost of home ownership. First time home buyers are at risk of being be priced out of the market, especially when interest rate begin to rise.
 
The numbers are somewhat unsettling. There has been a sudden surge in single family home prices in California coupled with flat sales are both attributed by the California Association of Realtors® (C.A.R.) to a scarcity of available homes for sale, especially in the lower price ranges.  The median price is at a five year high after an unprecedented spike in March.
 
Statewide inventory dropped 36 percent from last March and was below 3 months for the second time in the past few months.  Supply conditions are particularly tight in the lower-priced segment of the market, as inventory for homes priced below $300k plunged more than 50 percent from the previous year.

"Sales of homes priced $500,000 and higher are up more than 34 percent from last year, and have been on a rising trend since early 2012. Sales growth in the coastal regions - Marin, Orange, San Diego, and San Luis Obispo, in particular - helped push the statewide median price up to the highest level in more than four years."